all about GROWTH

Exponential growth potential is the key differentiator between a tech startup and a lifestyle business.

As an investor, our key talent should be digging and understanding the potential for exponential growth at a company. We've to understand the mindset and capabilities of the team and the business model if it has any chance to catch the exponential growth. On the founders side, they should keep looking for the ways to reach faster and faster growth without creating excuses. That requires a true growth minded founder team, which is pretty rare !!..

I've been involved more than 100 investments and personally evaluated more than 1.000. Let me share some "growth focused" observations;

TEAM

Many teams are problem solving, product design and development oriented. They don't think the growth as a first priority. When we hear the founders saying "we've never focused on marketing and sales, we will do after the investment", that's not a good sign !! The founders should create content, write newsletter, run the social media, talk with the customers, manage the performance marketing, calculate the CAC, LTV, retention metrics honestly and keep thinking to improve them even while sleeping..

VIRAL COEFFICIENT

The viral coefficient creates the massive effect for exponential growth. Everyone talks about word-of-mouth marketing but few of the products enjoy it. For example, if one customer is satisfied with your product enough to recommend it to five of their friends, and then they recommend it to five of their friends, your business will grow exponentially. Sometimes it's not about the quality or the problem you're solving. You're simply not giving the tools for the users to share and recommend. That's why, organic traction is the key metric to follow at any stage.

RETENTION RATE (STICKNESS)

The graph shows how you end up in a year when you acquire 100 users every month. As you can see, below 50% monthly retention rate will not carry you to a significant growth. 50% retention rate makes 2 times growth on annual basis. A good game has over 65% monthly retention rate while a popular social media platform has over 80% retention rate. It's clear on the graph why they grow and why they can easily spend high marketing budgets.

Let's say we've 100% monthly retention rate and we acquire 100 customers each month. We'll end up with 1.200 customers at the end of the year. If just 10% of our customers recommend us every month, then we'll end up with 2.350 customers. If every customer recommends us in every month, our year end number reaches over 1million. That's exponential growth and that's why we always check the ADDRESSABLE MARKET size. When you find the path for growth, you'll also need the market to scale.

TECHNOLOGY & OPERATION

You'll face many challenges when the scaling starts. I've seen products fail when they reach 100 CCU (concurrent user). You don't need to build a system which will carry millions of users at the first day but the team should be aware of what they're doing and use the correct technology from day 1 in order to easily scale when the time comes. The same philosophy should work for the operation as well. It's easy for the founders to check every comment on app store or answer the customer support tickets personally when you have a few customers. After the traction starts and you've hundreds, the organization should treat their customers as its first day. That's the secret of a sustaining metrics while scaling.

OBSESS OVER USER EXPERIENCE

Without an amazing user experience, keeping the high retention and engagement metrics will be impossible. First coming users may mislead you. Advanced users can find their path at any circumstance but mass market will not be able to do it. Don't forget to apply "Grandma test". Consider if you'd recommend the product to your own grandma. If you don't, no one will do.

Growth is always about the metrics. I suggest to define the impactful metrics for growth. There should not be a single metric such as revenue or number of users. When you achieve multiple positive impactful metrics combined, exponential growth will start. Define the KPIs to follow and be committed to them...

If you have a business at any stage with promising metrics, Bogazici Ventures is always keen to invest ??

https://bogaziciventures.com/startup/